Small Business Equipment Leasing

Equipment Leasing

Smart Strategy For Many Family Businesses


When a family business considers acquiring new equipment for their business, instead of making a purchase from existing cash or taking a loan from their bank, they should consider a smart financing strategy – equipment leasing.

An equipment leasing agreement is a rental agreement that covers a stated period of time between the lessor (the leasing company) and the lessee (the business acquiring the equipment).


Virtually any type of commercial equipment can be leased. Here is a sample list:

• Computers

• Machine Tools

• Medical Equipment

• Manufacturing Equipment

• Office Equipment

• Computer Software

• Telecommunication Equipment

• Construction Equipment

• Dental Equipment

• Light Industrial Equipment

• Heavy Industrial Equipment

• Printing Equipment


According to Fortune Magazine, each year over $100 billion worth of equipment is leased by American businesses. Leasing is “bigger than stocks, bonds, and even commercial mortgages”. The fastest growing method of financing is small business equipment leasing.

Billionaire J. Paul Getty stated that you should “buy what appreciates, lease what depreciates”!

Think of it this way, a family business needs to have as many of their assets as possible working for them at any one time in order to grow and to improve profitability.

With a small business equipment leasing strategy, when you lease, you can preserve cash and still get the equipment which becomes an asset to generate profits. Cash, as a working asset, can be put to use for you in other places that are profitable for the business.

The family business owner preserves cash by leasing because the business can finance 100% of the equipment costs through a lease without having to pay a down payment.

Small business equipment leasing agreements frequently include all “soft costs” as well which are the additional expenses involved with acquiring the equipment over and above the equipment costs. By including soft costs into your lease payments, you have the benefit of true 100% financing for the costs of shipment, delivery, installation, training and other service charges.


• A lease can give you long-term flexibility in controlling the useful life of equipment in your business. As an example, with technology equipment, rapid advances and changes can occur in two or three years causing obsolescence. The business can protect themselves from obsolescence by setting up their lease structure so that when their lease expires, they can either return the equipment and get newly updated models or purchase what they have under lease at fair market value and continue using it.

• A lease can expand a company’s budget because affordable monthly payments can mean the difference between improving your business now or waiting for a time when more cash can be made available for acquiring that equipment.

• The leasing company can provide the business with terms from 6 TO 84 months with flexible payment plans to suit the requirements of the business. Some businesses may have requirements to work around the seasonality of their business and need payment schedules that allow them to skip a payment in a certain month or even reduce payments over a specified time period because that time of year may be slow for them. The lessor will then provide level or structured repayment schedules for the business as needed. Structured repayment schedules can include: moratoriums, skip payments (as in skip the July payments every year), graduated payments to start slowly then build over time giving the time for the business to grow from use of the equipment. These options can all be combined with varying end of lease options, such as: fair market value, 10%, 5%, or $1.

• Leasing allows a business to establish additional credit lines because their existing bank lines are not touched and can continue to be utilized for other financial needs of the business.

• Leasing offers significant tax advantages because the lease payments may be deductible as an operating expense, depending on how the lease is structured. A lease professional or accountant can assist you in defining the specific advantages for your business.

• Leasing can be a good move to hedge against economic changes such as inflation. When a business leases equipment, they pay for it as they use it. When purchasing, they pay in current dollar values for future use of the equipment. So as inflation occurs, leasing provides protection against future decreases in dollar value.


The lease rate factor is the value that the lessor provides you the lessee as the multiplier to determine your monthly lease payment. The lessor determines this value by looking at the overall credit risk of your lease application. They will consider the type and ease of recovery of the equipment should you default, the aftermarket for the equipment, the strength of your business and history of payments (such as through Dun & Bradstreet reports) and the requested term length among other considerations.

In summary, leasing can be a powerful tool to business owners to provide them the ability to acquire equipment that can add to the profitability of their business.

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